Paper

2007 was a strong year for the recovered fiber market, and sources express cautious optimism about 2008.

In the last month of the year, most prices held fairly steady, although OCC (old corrugated containers) slipped a bit at year’s end. However, sources say demand has been strong enough to keep orders filled and product moving.

Typically, the end of the year brings fat newspapers loaded with advertising for the holiday season. Some regions of the country saw the expected higher level of ONP volume while others did not. One Midwestern packer reported unusually low generation for both OCC and ONP; however, that’s not necessarily all bad for the market. "There’s usually an upswing in volume this time of year, but especially on the retail side, we’re seeing volumes kind of off the mark," says the packer. "Pricing has held, so that tells me that pricing could swing up because the generation isn’t there."

Sources say they expect the Christmas holiday taking place on a Tuesday will likely disrupt the flow of material somewhat. However, they say they expect the interruption to be short-lived and that the market should at least pick up where it left off at the end of December.

On the newsprint front, the industry is still coming to grips with the finalized merger of Abitibi and Bowater. The joint company AbitibiBowater has announced plans to shutter several Canadian mills, reducing paper production capacity by approximately 1 million metric tons. AbitibiBowater announced that reductions will include permanent closure of the company’s mills in Shawinigan, Quebec; and Dalhousie, New Brunswick, as well as the indefinite idling of its Donnacona, Quebec, and Mackenzie, British Columbia, paper mills. The company also announced plans to indefinitely idle two Mackenzie sawmills that support its Mackenzie paper operation.

The closures represent about 600,000 metric tons of newsprint, 400,000 metric tons of commercial printing papers and 500 million board feet of lumber capacities.

Additionally, the company will close the previously idled Fort William mill in Thunder Bay, Ontario; and the Lufkin, Texas, paper mills as well as the No. 3 paper machine at its Gatineau, Quebec, facility. The previously idled operations had a total capacity of 650,000 metric tons.

One Midwestern recycler says the announced closings have had no direct impact on his operation so far, but adds that the industry might not feel the full ramifications of the merger and capacity closures for some time.

The picture isn’t completely bleak for ONP, however, says a Midwestern recycler, who recalls a time when news was a negative line item. "We’re a long way from that," he says. "Will we always be at $100 a ton? Not sure about that," he adds.

Looking out to 2008, sources report feeling cautiously optimistic—with the optimism reigning for the beginning of the year and the caution kicking in after the second quarter. For now, the news from China is more added capacity from many of the country’s large mills, which indicates that export demand will remain strong in the short term. However, sources report feeling uncertain about what will happen to the market once the Beijing Olympics are over in August 2008. "Does that mean that next fall the Chinese will cut back to meet realistic demand in everything—in paper, manufacturing, steel…?" asks one Midwestern recycler. "I think 2008 will start off good—whether it will finish that way is what I’m unsure of," he says.